[This essay originally appeared as "The Theory of Economic Development and
the 'European Miracle'" in The Collapse of Development Planning,
edited by Peter J. Boettke]

Among writers on economic development, P.T. Bauer is noted both for the depth
of his historical knowledge, and for his insistence on the indispensability of
historical studies in understanding the phenomenon of growth (Walters 1989, 60;
see also Dorn 1987).
In canvassing the work of other theorists, Bauer has complained of their
manifest "amputation of the time dimension":

… The historical background is essential for a worthwhile discussion of
economic development, which is an integral part of the historical progress of
society.
But many of the most widely publicized writings on development effectively
disregard both the historical background and the nature of development as a
process. (Bauer 1972, 324–25)

Too many writers in the field have succumbed to professional overspecialization
combined with a positivist obsession with data that happen to be amenable to
mathematical techniques.
The result has been models of development with little connection to
reality:

… Abilities and attitudes, mores and institutions, cannot generally be
quantified in an illuminating fashion…
Yet they are plainly much more important and relevant to development than such
influences as the terms of trade, foreign exchange reserves, capital output
ratios, or external economies, topics which fill the pages of the consensus
literature. (Ibid., 326)

Even when a writer appears to approach the subject historically, concentration
on quantifiable data to the neglect of underlying institutional and
social-psychological factors tends to foreshorten the chronological perspective
and thus vitiate the result:

… It is misleading to refer to the situation in eighteenth -and
nineteenth-century Europe as representing initial conditions in development. By
then the west was pervaded by the attitudes and institutions appropriate to an
exchange economy and a technical age to a far greater extent than south Asia
today.
These attitudes and institutions had emerged gradually over a period of eight
centuries. (Ibid., 219–20)[1]

At the root of the approach criticized by Bauer there appears to be a
methodological holism that prefers to manipulate aggregates while ignoring
individual human actors and the institutions their actions generate. Yet,
"differences in people's capacities and attitudes and in their institutions are
far-reaching and deepseated and largely explain differences in economic
performance and in levels and rates of material progress" (ibid.,
313–14; emphasis added).

Bauer's critique thus draws attention to the need to study both the centuries
of European history antedating the Industrial Revolution and "the
interrelationships between social, political, and legal institutions" in that
period (ibid., 277).

Here his assessment links up with an impressive body of scholarship that has
emerged in recent years emphasizing precisely these points.

1. The "European Miracle".

While it would be wrong to suggest the existence of any monolithic analysis, a
number of scholars concerned with the history of European growth have tended to
converge on an interpretation highlighting certain distinctive factors.
For the sake of convenience, we shall, therefore, speak of them, despite their
differences, as forming a school of thought.
The viewpoint may be referred to as the "institutional" — or, to use the title
of one of the best-known works in the field — the "European miracle"
approach.

The "miracle" in question consists in a simple but momentous fact: It was in
Europe — and the extensions of Europe, above all, America — that human beings
first achieved per capita economic growth over a long period of time.
In this way, European society eluded the "Malthusian trap," enabling new tens
of millions to survive and the population as a whole to escape the hopeless
misery that had been the lot of the great mass of the human race in earlier
times.
The question is: why Europe?

One possible answer, which has long enjoyed powerful support in intellectual
circles in the West and among officials in underdeveloped countries, was
heavily influenced by socialist and even Marxist tenets.
It accounted for Europe's extraordinary growth largely by the more or less
spontaneous advance of science, combined with a "primitive accumulation" of
capital — through imperialism, slavery and the slave trade, the expropriation
of small farmers, and the exploitation of the domestic working class.
The conclusion was clear. The extraordinary growth of Europe was at the expense
of untold millions of the enslaved and downtrodden, and the European experience
should serve decision makers in underdeveloped countries more as a cautionary
tale than an exemplar.

The contributors to the newer model, however, reject this venerable
legend.
Concerned as they are with comparative economic history, they have sought for
the origins of European development in what has tended to set Europe apart from
other great civilizations, particularly those of China, India, and Islam.
To one degree or another, their answer to the question, why Europe? has been:
Because Europe enjoyed a relative lack of political constraint.
As Jean Baechler, in a pioneering work, pointedly expressed it:

… The first condition for the maximization of economic efficiency is the
liberation of civil society with respect to the state…
The expansion of capitalism owes its origins and raison d'être to political
anarchy. (Baechler 1975, 77, 113; emphasis in original).

2. The Uniqueness of Europe

John Hicks partially adumbrated this approach in the late 1960s (Hicks
1969).

In A Theory of Economic History, Hicks laid out the "chief needs" of
the expanding, mercantile phase of economic development — the protection of
property and the enforcement of contracts — and stated:
The Mercantile Economy, in its First Phase, was an escape from political
authority — except in so far as it made its own political authority.
Then, in the Middle Phase, when it came formally back under the traditional
political authority, that authority was not strong enough to control it.
(Ibid., 33, 100)

Hicks's account, however, proved to be much too schematic, besides limiting
itself to economic analysis and deliberately ignoring political, religious,
scientific, and other factors (see Bauer 1971).
Around the same time as Hicks, David Landes was sketching the essentials of the
newer outlook. In seeking to answer the question why the industrial
breakthrough occurred first in western Europe, he highlighted two factors
"that set Europe apart from the rest of the world … the scope and effectiveness
of private enterprise, and the high value placed on the rational manipulation
of the human and material environment" (Landes 1970, 14–15).
"The role of private enterprise in the West," in Landes's view, "is perhaps
unique: more than any other factor, it made the modern world" (Ibid.,
15).

But what was it that permitted private enterprise to flourish? Landes
pinpointed the circumstance that would be vital to the new interpretation —
Europe's radical decentralization:

Because of this crucial role as midwife and instrument of power in a context of
multiple, competing polities (the contrast is with the all-encompassing empires
of the Orient or the Ancient World), private enterprise in the West possessed a
social and political vitality without precedent or counterpart.
(Ibid.; emphasis in original)

Damaging incursions by government did occur, and the situation in some parts of
Europe conditioned a social preference for military values; "on balance,
however, the place of private enterprise was secure and improving with time;
and this is apparent in the institutional arrangements that governed the
getting and spending of wealth" (Ibid.).

A precondition of economic expansion was the definition and defense of property
rights against the political authority. This occurred early on in Europe.
Landes contrasts the European method of regular taxation (supervised by
assemblies representative of the tax-bearing classes) with the system of
"extortion" prevalent in
"the great Asian empires and the Muslim states of the Middle East … where
fines and extortions were not only a source of quick revenue but a means of
social control — a device for curbing the pretensions of nouveaux riches and
foreigners and blunting their challenge to the established power structure"
(Ibid., 16–17).

Landes's insights, briefly sketched in a few pages of introduction to his
Prometheus Unbound, have been vastly elaborated upon by the new school. The
upshot is an overall interpretation of Western history that may be stated as
follows:

Although geographical factors played a role, the key to western development is
to be found in the fact that, while Europe constituted a single civilization —
Latin Christendom — it was at the same time radically decentralized. In
contrast to other cultures — especially China, India, and the Islamic world —
Europe comprised a system of divided and, hence, competing powers and
jurisdictions.

After the fall of Rome, no universal empire was able to arise on the Continent.
This was of the greatest significance. Drawing on Montesquieu's dictum, Jean
Baechler points out that "every political power tends to reduce everything that
is external to it, and powerful objective obstacles are needed to prevent it
from succeeding" (Baechler 1975, 79). In Europe, the "objective obstacles" were
provided first of all by the competing political authorities. Instead of
experiencing the hegemony of a universal empire, Europe developed into a mosaic
of kingdoms, principalities, city-states, ecclesiastical domains, and other
political entities.

Within this system, it was highly imprudent for any prince to attempt to
infringe property rights in the manner customary elsewhere in the world. In
constant rivalry with one another, princes found that outright expropriations,
confiscatory taxation, and the blocking of trade did not go unpunished. The
punishment was to be compelled to witness the relative economic progress of
one's rivals, often through the movement of capital, and capitalists, to
neighboring realms. The possibility of "exit," facilitated by geographical
compactness and, especially, by cultural affinity, acted to transform the state
into a "constrained predator" (Anderson 1991, 58).

Decentralization of power also came to mark the domestic arrangements of the
various European polities. Here feudalism — which produced a nobility rooted in
feudal right rather than in state-service — is thought by a number of scholars
to have played an essential role (see, e.g., Baechler 1975, 78). Through the
struggle for power within the realms, representative bodies came into being,
and princes often found their hands tied by the charters of rights (Magna
Carta, for instance) which they were forced to grant their subjects. In the
end, even within the relatively small states of Europe, power was dispersed
among estates, orders, chartered towns, religious communities, corps,
universities, etc., each with its own guaranteed liberties. The rule of law
came to be established throughout much of the Continent.

Thus, there is general agreement that crucial to laying the foundations for the
European miracle were, in Jones's words, the "curtailment of predatory
government tax behavior" and "the limits to arbitrariness set by a competitive
political arena" (Jones 1987, xix, xxi). Over time, property rights — including
rights in one's own person — came to be more sharply defined, permitting owners
to capture more of the benefits of investment and improvement (North 1981).
With the freer disposition of private property came the possibility of ongoing
innovations, tested in the market. Here, too, the rivalrous state system was
highly favorable. The nations of Europe functioned "as a set of joint-stock
corporations with implicit prospectuses listing resources and freedoms" in such
a way as to insure "against the suppression of novelty and unorthodoxy in the
system as a whole" (Jones 1987, 119). A new social class arose, consisting of
merchants, capitalists, and manufacturers "with immunity from interference by
the formidable social forces opposed to change, growth, and innovation"
(Rosenberg and Birdzell 1986, 24).

Eventually, the economy achieved a degree of autonomy unknown elsewhere in the
world except for brief periods. As Jones puts it:

Economic development in its European form required above all freedom from
arbitrary political acts concerning private property. Goods and factors of
production had to be free to be traded. Prices had to be set by unconditional
exchange if they were to be undistorted signals of what goods and services
really were in demand, where and in what quantities. (Jones 1987, 85)

The system protecting the ownership and deployment of private property evolved
in Europe by slow degrees — over at least "the eight centuries" mentioned by
Bauer. Quite logically, therefore, the economic historians concerned with "how
the West grew rich" have directed a great deal of their attention to the
medieval period.

3. The Importance of the Middle Ages

The stereotype of the Middle Ages as "the Dark Ages" fostered by Renaissance
humanists and Enlightenment philosophes has, of course, long since been
abandoned by scholars. Still, the "consensus" writers on economic development
whom Bauer faults have by and large ignored the importance of the Middle Ages
for European growth — something that makes as much sense as beginning the
explanation of the economic and cultural successes of European Jewry with the
eighteenth century. Economic historians, however, following in the footsteps of
the great Belgian historian Henri Pirenne (Pirenne 1937), have had a quite
different estimation of the medieval period. Carlo M. Cipolla asserts that "the
origins of the Industrial Revolution go back to that profound change in ideas,
social structures, and value systems that accompanied the rise of the urban
communes in the eleventh and thirteenth centuries" (Cipolla 1981, 298).

Here, for the first time in history, an underdeveloped society succeeded in
developing itself, mostly by its own efforts … it created the indispensable
material and moral conditions for a thousand years of virtually uninterrupted
growth; and, in more than one way, it is still with us. (Lopez 1971, vii)
Lopez contrasts the European evolution with that of a neighboring civilization,
Islam, where political pressures smothered the potential for an economic
upsurge:
The early centuries of Islamic expansion opened large vistas to merchants and
tradesmen. But they failed to bring to towns the freedom and power that was
indispensable for their progress. Under the tightening grip of military and
landed aristocracies the revolution that in the tenth century had been just
around the corner lost momentum and failed. (Ibid., 57)

In Europe, as trade and industry expanded, people discovered that "commerce
thrives on freedom and runs away from constriction; normally the most
prosperous cities were those that adopted the most liberal policies" (Ibid.,
90). The "demonstration effect" that has been a constant element in European
progress — and which could exist precisely because Europe was a decentralized
system of competing jurisdictions — helped spread the liberal policies
that brought prosperity to the towns that first ventured to experiment with
them.

Scholars like Cipolla and Lopez, attempting to understand European development
in the Middle Ages, make constant reference to ideas, value systems, moral
conditions, and similar cultural elements.

As Bauer has emphasized, this is a part of the distinctive European evolution
that cannot be divorced from its institutional history. In regard to the Middle
Ages, prime importance, in the view of many writers, attaches to Christianity.
Harold J. Berman (Berman 1974) has stressed that with the fall of Rome and the
eventual conversion of the Germans, Slavs, Magyars, and so forth, Christian
ideas and values suffused the whole blossoming culture of Europe. Christian
contributions range from the mitigation of slavery and a greater equality
within the family to the concepts of natural law, including the legitimacy of
resistance to unjust rulers. The Church's canon law exercised a decisive
influence on Western legal systems: "it was the church that first taught
Western man what a modern legal system was like" (Ibid., 59).

Berman, moreover, focuses attention on a critical development that began in the
eleventh century: the creation by Pope Gregory VII and his successors of a
powerful "corporate, hierarchical church … independent of emperors, kings, and
feudal lords," and thus capable of foiling the power-seeking of temporal
authority (Ibid., 56).

In this way, Berman bolsters Lord Acton's analysis of the central role of the
Catholic church in generating Western liberty by forestalling any concentration
of power such as marked the other great cultures, and thus creating the Europe
of divided and conflicting jurisdictions.11

In a major synthesis, Law and Revolution, Berman has highlighted the legal
facets of the development whose economic, political, and ideological aspects
other scholars have examined (Berman 1983):
"Perhaps the most distinctive characteristic of the Western legal tradition is
the coexistence and competition within the same community of diverse legal
systems. It is this plurality of jurisdictions and legal systems that makes the
supremacy of law both necessary and possible" (Ibid., 10) 12

Berman's work is in the tradition of the great English scholar, A.J. Carlyle,
who, at the conclusion of his monumental study of political thought in the
Middle Ages, summarized the basic principles of medieval politics: that all —
including the king — are bound by law; that a lawless ruler is not a legitimate
king, but a tyrant; that where there is no justice there is no commonwealth;
that a contract exists between the ruler and his subjects (Carlyle and Carlyle
1950, 503–26).

Other recent scholarship has supported these conclusions. In his last,
posthumous work, the distinguished historian of economic thought, Jacob Viner,
noted that the references to taxation by St. Thomas Aquinas "treat it as a more
or less extraordinary act of a ruler which is as likely as not to be morally
illicit" (Viner 1978, 68–69). Viner pointed to the medieval papal bull, In
Coena Domini — evidently republished each year into the late eighteenth century
— which threatened to excommunicate any ruler "who levied new taxes or
increased old ones, except for cases supported by law, or by an express
permission from the pope" (Ibid., 69). Throughout the Western world, the Middle
Ages gave rise to parliaments, diets, estates-generals, Cortes, etc., which
served to limit the powers of the monarch. [13]
Almost everywhere in Latin Christendom the principle was, at one time or
another, accepted by the rulers that, apart from the normal revenues of the
prince, no taxes could be imposed without the consent of parliament … By using
their power of the purse [the parliaments] often influenced the rulers
policies, especially restraining him from military adventures. (Myers 1975
29–30) In a recent synthesis of modern medievalist scholarship, Norman F.
Cantor has summarized the heritage of the European Middle Ages in terms
strikingly similar to those employed by the current institutional
historians:
In the model of civil society, most good and important things take place below
the universal level of the state: the family, the arts, learning, and science;
business enterprise and technological process. These are the work of
individuals and groups, and the involvement of the state is remote and
disengaged. It is the rule of law that screens out the state's insatiable
aggressiveness and corruption and gives freedom to civil society below the
level of the state. It so happens that the medieval world was one in which men
and women worked out their destinies with little or no involvement of the state
most of the time. (Cantor 1991, 416)

One highly important factor in the advance of the West, possibly linked to
Christianity, has not, however, been dealt with by the newer economic
historians. It is the relative lack of institutionalized envy in Western
culture. In a work endorsed by Bauer, the sociologist Helmut Schoeck has drawn
attention to the omnipresence of envy in human societies (Schoeck [1969] 1987).
Perceived as a grave threat by those at whom it is directed, it typically
results in elaborate envy-avoidance behavior: the attempt to ward off the
dangers of malicious envy by denying, disguising, or suppressing whatever
traits provoked it. The antieconomic consequences of socially permitted — or
even encouraged — envy and reactive envy-avoidance scarcely lend themselves to
quantification. Nonetheless, they may clearly be highly damaging. Drawing on
anthropological studies, Schoeck stresses the harm that institutionalized envy
can inflict on the process of economic and technical growth (Ibid., 73).
Western culture, according to Schoeck, has somehow been able to inhibit envy to
a remarkable degree. Why this is so is less clear. Schoeck links this fact to
the Christian faith: "It must have been one of Christianity's most important,
if unintentional, achievements in preparing men for, and rendering them capable
of, innovative actions when it provided man for the first time with
supernatural beings who, he knew, could neither envy nor ridicule him" (Ibid.,
79). Yet the evident variation in socially permitted envy in different
Christian societies (e.g., Russia as against western Europe) suggests that the
presence of Christian faith alone is not an adequate explanation.

4. Case Studies of Development.

Obviously, all of Europe did not progress at the same rate. In particular, in
the modern period the Netherlands and then England became the pacesetters of
economic growth, while other countries declined. These facts can also be
accounted for by the model.

The Low Countries had long benefited from the legal system inherited from the
dukes of Burgundy. These rulers, who governed in collaboration with an active
estates-general, 14 had promoted an open commercial and industrial system,
based on protection of property rights. In the rise of the "northern
Netherlands" (the United Provinces, or "Holland") we have a near-perfect
example of the European miracle in operation. First, the area had been a major
participant in European economic, political, social, and cultural developments
for centuries. As Cipolla has observed, "The country that in the second half of
the sixteenth century rebelled against Spanish imperialism and then rose to the
role of Europe's economically most dynamic nation, was anything but an
underdeveloped country from the outset" (Cipolla 1981, 263). Owing its
independence to the decentralized state system of Europe, it emerged itself as
a decentralized polity, without a king and court — a "headless commonwealth"
that combined secure property rights, the rule of law, religious toleration,
and intellectual freedom with a degree of prosperity that amounted to an early
modern Wirtschaftswunder. It is not surprising that Holland exerted a powerful
demonstration effect. As K.W. Swart states:
both foreigners and Dutchmen were apt to believe that the Dutch Republic was
unique in permitting an unprecedented degree of freedom in the fields of
religion, trade, and politics…. In the eyes of contemporaries it was this
combination of freedom and economic predominance that constituted the true
miracle of the Dutch Republic. (Swart 1969, 20)

The success of the Dutch experiment was noted with great interest, especially
in England, whose soil was already well prepared to accept the idea that
prosperity is a reward of freedom. The deep roots of economic individualism,
and hence of development, in English medieval history have been emphasized by
Alan Macfarlane (Macfarlane 1978 and 1987). 15

In the early modern period, the common law, which had evolved over many
centuries, acted as a guarantor of the sanctity of property and free entry to
industry and trade against the policies of the early Stuart kings. In the face
of authoritarian usurpations, Sir Edward Coke and his fellow jurists acted, in
the words of North and Thomas, "to place the creation of property rights beyond
the royal whim; to embed existing property rights in a body of impersonal law
guarded by the courts" (North and Thomas 1973, 148). Crucial in the case of
both the Netherlands and England was the preservation, against attempted royal
encroachments, of traditional representative assemblies determined to deny the
ruler the right to tax at will. Here the antiauthoritarian side exploited — and
further developed — the inherited discourse whose key concepts included
"liberties," "rights," "the law of nature," and "constitution."

The decline of Spain, on the other hand, is also taken into account in the
model. Confiscation of the property of Jews and Moors by the Spanish crown was,
according to North and Thomas:
only symptomatic of the insecurity of all property rights . . seizure,
confiscation, or the unilateral alteration of contracts were recurrent
phenomena which ultimately affected every group engaged in commerce or industry
as well as agriculture…. As no property was secure, economic retardation was
the inevitable consequence. (Ibid., 131)

The economic decay of Spain, in turn, provided a negative demonstration effect
that played a potent role in the policy choices of other countries.

The theme of the autonomy of the market and the inhibition of the
predator-state as major factors in economic growth is pursued in the
examination of non-European cultures. Baechler, for instance, states that "each
time China was politically divided, capitalism flourished," and maintains that
Japanese history manifests conditions approximating those of Europe (Baechler
1975, 82–86). Anderson, after surveying economic growth in the history of Sung
China and Tokugawa Japan, as well as the Netherlands and England, concludes
that the common element is that "they occurred when governmental constraints on
economic activity were relaxed" (Anderson 1991, 73–74) 16

While, needless to say, much more research requires to be done on economic
development in the history of non-European civilizations, the evidence so far
suggests strong support for the basic thrust of the institutional
approach.

5. Contrast of Europe with Russia.

The meaning of the European miracle can be better seen if European developments
are contrasted with those in Russia. Colin White lists, as the determining
factors of Russian backwardness "a poor resource and hostile risk environment …
an unpropitious political tradition and institutional inheritance, ethnic
diversity, and the weakness of such key groups limiting state power as the
church and landed oligarchy." (White 1987, 136)

After the destruction of Kievan Rus by the Tatars and the rise of Muscovy,
Russia was characterized for centuries by the virtual absence of the rule of
law, including security for persons and property.

The lawlessness — as well as the poverty — of Muscovite Russia was notorious.
When the emissary of Elizabeth I inquired of Ivan the Great the status of his
subjects, he was told: "All are slaves" (Besançon, in Baechler, Hall, and Mann
1988, 161). Ivan IV, the Terrible, annihilated the flourishing commercial
republics of Novgorod and Pskov, and loosed his Oprichnina (Ivan's praetorian
guard) on the kingdom for a frenzy of butchery that came to stand for what was
permissible in the Muscovite state. Alain Besançon remarks dryly,
"Of the three legends (Romanian, German, and Russian) that depict, in the guise
of Dracula, the reign of Vlad the Impaler, the Russian alone sings the praises
of the prince" (Ibid.).

The nobility in Russia was a state-service nobility, lacking any independent
base. As White observes: "Russia was never truly feudal in the west European
sense of the term" (White 1987, 10). In contrast to Europe and America, the
towns, as well, were "simply another arm of the state" (Ibid., 137–38). The
differences between Russia and the West can be seen in their respective ideas
of "absolutism." Ivan IV's concept is well known. It may be compared with that
of a political writer in the West who is famous as a defender of royal
absolutism, Jean Bodin. Alexander Yanov has pointed out that, for all his faith
in absolutism:

Bodin regarded the property of the citizens as their inalienable possession, in
the disposition of which they were no less sovereign than was the monarch in
ruling his people. To tax citizens of a part of their inalienable property
without their voluntary consent was, from Bodin's point of view, ordinary
robbery. (Yanov 1981, 44–45) 17

In this connection, Yanov reports a telling anecdote. A French diplomat in a
conversation with an English colleague affirmed his belief in the principle
enunciated by Louis XIV, that the king was ultimate owner of all the property
within his kingdom (a principle which even the Sun-King never dared to act
upon). The Englishmen retorted: "Did you study public law in Turkey?" (Ibid.,
44 n. 17)

The fact that Russia received Christianity from Byzantium rather than Rome
shaped the entire course of Russia's history (Pipes 1974, 221–43). In the words
of Richard Pipes, the Orthodox church in Russia became, like every other
institution, "the servant of the state." Pipes concludes, regarding the
"relations between state and society in pre-1900 Russia":
None of the economic or social groups of the old regime was either able or
willing to stand up to the crown and challenge its monopoly of political power.
They were not able to do so because, by enforcing the patrimonial principle,
i.e., by effectively asserting its claim to all the territory of the realm as
property and all its inhabitants as servants, the crown prevented the formation
of pockets of independent wealth or power. (Ibid., 249)

What ideas of liberalism came to Russia came perforce from the West. It was
from listening to the lectures on natural law at the University of Leipzig that
Alexander Radishchev first learned that limits may be put to the power of the
tsar (Clardy 1964, 37–38). The beginnings of the shift to a more
market-oriented economic policy before the First World War are traced by
Besancon to the fact that the Russian ministers read the liberal economists
(Besancon, in Baechler, Hall, and Mann 1988, 166).

6. The Downfall of Marxist Historiography.

The Marxist philosophy of history is filled with manifold, often strategic,
contradictions and ambiguities. Yet, if "historical materialism" has any
significant content at all it is as a technological interpretation of history
(Mises 1957, 106–12; Bober 1962, 3 — -). Although Nathan Rosenberg has denied
that Marx held that "technological factors are, so to speak, the independent
variable in generating social change, which constitutes the dependent variable"
(Rosenberg 1982, 36; see also 34–51), 18 the weight of evidence is heavily
against him (Cohen 1978, 134–0).

According to Marx, Engels, and the theoreticians of the "Golden Age" of the
Second International, history proceeds basically via changes in the "material
productive forces" (the technological base), which render obsolete the existing
"mode of production" (the property system). Because of technological changes,
the mode of production is compelled to change; with it, everything else — the
whole legal, political, and ideological "superstructure" of society — is
transformed, as well (Marx [1859] 1969b, 8-). As Marx put it
aphoristically:
"The wind mill yields a society with feudal lords, the steam mill a society
with industrial capitalists" (Marx [1847] 1969a, 130).

Marxism has, of course, been subjected for generations to withering rebuttal on
many different fronts, not least in regard to its philosophy of history. The
newer understanding of European history is particularly destructive of its
fundamental claims, however, in that it directs attention to the peculiar
shallowness of "historical materialism." This newer understanding insists that
the colossal growth of technology in the Western world in the past millennium
must itself be explained, and the explanation it provides is in terms of the
institutional and moral matrix that emerged in Europe over many
centuries.19

New and more productive machines did not spring forth mysteriously and
spontaneously, nor was the spectacular expansion of technical and scientific
knowledge somehow inevitable. As Anderson has summed up the evidence, "the
scientific and technical stasis that followed the remarkable achievements of
the Song dynasty, or of the flowering of early Islam, indicates that scientific
inquiry and technology do not necessarily possess in themselves the dynamism
suggested by the European experience" (Anderson 1991, 46). On the contrary,
technology and science emerged out of an interrelated set of political, legal,
philosophical, religious, and moral elements in what orthodox Marxism has
traditionally disparaged as the "superstructure" of society.

Conclusion.

According to the Indian development economist R.M. Sundrum, if we are to
understand how development can be promoted in the poorer countries today, we
must understand the historical process which transformed developed countries in
the past, and why this process failed to take place elsewhere (cited in Arndt
1987, 177). This is the position that P.T. Bauer, too, has insisted upon.
Rejecting the "timeless approach" to economic development, Bauer has
accentuated the many centuries required for economic growth in the Western
world, and the interplay of various cultural factors that were its
precondition. Most important, in Bauer's view, is that in the Western world
institutions and values evolved that favored private property and the market,
set limits to state arbitrariness and predation, and encouraged innovation and
the sense that human beings are capable of improving their lot through their
actions on the market.

Recently, W.W. Rostow, in a summary of Bauer's career, chided him for failing
"to take adequately into account the extremely large and inescapable role of
the state in early phases of development" (Rostow 1990, 386). 20

Such a criticism is not surprising, coming from one of the leaders of what
Bauer has for years assailed as the "spurious consensus." Yet it finds little
support in the work of the historians dealt with here. (For some reason, Rostow
ignores this whole body of scholarship in his very lengthy history of theories
of economic growth; Ibid., passim). While some of these authors would stipulate
a significant role for the state in certain areas — particularly in defining
and enforcing property rights — this is consistent with Bauer's viewpoint.
Moreover, the overall thrust of their work — which stresses the importance of
limits on state action in the development of the West — tends to corroborate
Bauer's position rather than Rostow's. Peter Burke, for instance, writing on
one of the earliest examples of European development — the merchant-states of
northern Italy and the Netherlands — describes them as "pro-enterprise cultures
in which governments did relatively little to frustrate the designs of
merchants or hinder economic growth, a negative characteristic which all the
same gave those countries an important advantage over their competitors" (Burke
in Baechler, Hall, and Mann 1988, 230). William H. McNeill notes that "within
Europe itself, those states that gave the most scope to private capital and
entrepreneurship prospered the most, whereas better governed societies in which
welfare on the one hand or warfare on the other commanded a larger proportion
of available resources tended to lag behind." As the growth leaders McNeill
cites "such conspicuously undergoverned lands as Holland and England" (McNeill
1980, 65). And F.L. Jones takes as a guiding principle in the explanation of
growth a famous passage from Adam Smith: "Little else is requisite to carry a
state to the highest degree of opulence from the lowest barbarism, but peace,
easy taxes, and a tolerable administration of justice; all the rest being
brought about by the natural course of things" (Jones 1987, 234–35, cited in
Stewart [1793] 1966, 68).

The new paradigm generated by the work of these and other scholars has already
helped produce further major works of research and synthesis.21

It goes without saying that a great deal more study is required. Yet it is
likely that further research will provide additional substantiation of the
viewpoint steadfastly represented by Professor Bauer. As Anderson observes:
"The emphasis on release from constraints points to a fruitful direction of
research into why some societies experienced economic development and others
didn't" (Anderson 1991, 73–74). In any case, the subject will continue to be of
very great theoretical interest to scholars — and to many millions in the
underdeveloped world, a matter of life and death.

References.

Acton, John Emerich Edward Dalberg. 1956. "The History of Freedom in
Christianity." In Essays on Freedom and Power, ed. Gertrude Himmelfarb, 82–112.
New York: Meridian.

Hayek, F.A. 1954. "History and Politics." In idem, ed., Capitalism and the
Historians. Chicago: University of Chicago Press.

Hicks, John. 1969. A Theory of Economic History. Oxford: Oxford University
Press.

Jones, E.L. 1987. The European Miracle: Environments, Economies, and
Geopolitics in the History of Europe and Asia. 2d ed. Cambridge: Cambridge
University Press.
——. 1988. Growth Recurring. Economic Change in World History. Oxford: Oxford
University Press.

Kennedy, Paul. 1987. The Rise and Fall of the Great Powers: Economic Change and
Military Conflict, 1500–2000. New York: Random House.

Landes, David. 1970. Unbound Prometheus: Technological Change and Industrial
Development in Western Europe from 1750 to the Present. Cambridge: Cambridge
University Press.

North, Douglass C. 1981. Structure and Change in Economic History. New York:
Norton.
North, Douglass C., and Robert Paul Thomas. 1973. The Rise of the Western
World: A New Economic History. Cambridge: Cambridge University Press.

Yanov, Alexander. 1981. The Origins of Autocracy: Ivan the Terrible in Russian
History. Trans. Stephen Dunn. Berkeley: University of California Press.

Notes.

[1] Cf. Roberts (1985, 75), who writes of "the general liberation of the
economy," which was well on the way to autonomy everywhere in western Europe by
1500, if autonomy means regulation by prices providing undistorted signals of
demand and a substantial degree of security for property against arbitrary
confiscation by king, lord, or robber."

[2] Cf. Rosenberg (1976, 286), who raises the question why Western European
civilization was able to evolve a uniquely powerful combination of cultural
values, incentive systems, and organizational capabilities, and remarks:
"Interesting answers to this question are unlikely to come from any single
social science discipline."

[3] Major works in the field include North and Thomas (1973); Baechler (1975);
North (1981); Rosenberg and Birdzell (1986); Jones (1987); Baechler, Hall, and
Mann (1988), especially the essays by Michael Mann, John A. Hall, Alain
Besançon, Karl Ferdinand Werner, and Peter Burke; and Jones (1988). Summaries
of some of the scholarship are provided by Anderson (1991); and Weede (1988)
and (1990, 40–59). See also Osterfeld (1992, 43–46). The essay by McNeill
(1980) makes creative use of the fundamental concepts of the approach.

[4] F.A. Hayek in the 1950s referred to "a socialist interpretation of history
which has governed political thinking for the last two or three generations and
which consists mainly of a particular view of economic history." See Hayek
(1954, 7).

[5] The idea of a strong connection between the relative freedom of European
society and its economic success can, of course, be traced back to much earlier
authors, including those in the Whig historical tradition. Here it is being
considered in the context of recent, mainly economic, historiography.

[6] A secondary theme (Landes 1970, 21–22) is the character of the European
Weltanschauung. Landes points to the emphasis on rationality in European
culture, relative to others, fostered by elements in Christianity that
ultimately may be traced to Judaism's disparagement of magic and
superstition.

[7] Cf. Baechler (1975, 74): Europe was "a society based upon the same moral
and material civilization that never ended up in political unity, in short, in
an Empire."

[9] I am grateful to Leonard P. Liggio for calling my attention to this
essay.

[10] Cf. Roberts (1985, 67–9), on the Hildebrandine reform, and his comment,
68–69:
"The preservation of an idea of liberty and its transmission to the future thus
owes an incalculable amount to the quarrels of church and state."

[11] See Lord Acton's great essay, "The History of Freedom in Christianity
(Acton 1956): To that conflict of four hundred years [between the Church and
the temporal rulers] we owe the rise of civil liberty… although liberty was not
the end for which they strove, it was the means by which the temporal and the
spiritual power called the nations to their aid. The towns of Italy and Germany
won their franchises, France got her States-General, and England her Parliament
out of the alternate phases of the contest; and as long as it lasted it
prevented the rise of divine right" (86–87).

[12] Cf. Chirot (1986, 23): "The main reason for the legal rationalization of
the West, then, was the long, indecisive, multisided political struggle between
king, nobles, the church, and the towns."

13] See A.R. Myers (1975, 24), who states of these parliamentary bodies: "they
flourished at one time or another in every realm of Latin Christendom. They
first emerge clearly towards the end of the twelfth century in the Spanish
kingdom of Leon, in the thirteenth century in Castile, Aragon (and also
Catalonia and Valencia), Portugal, Sicily, the Empire and some of the
constituent states such as Brandenburg and Austria, and in England and Ireland.
In the fourteenth century … in France … the Netherlands, Scotland, more of the
German and Italian states, and Hungary; in the fifteenth century … in Denmark,
Sweden, and Poland."

[15] Cf. Baechler (1975, 79): "If the general political structure of the West
was favorable to economic expansion, it would be the most marked in that
country where political power was most limited and tolerated the greatest
autonomy of civil society." That country, according to Baechler, was
England.

[16] See also the chapters on Sung China and Japan in Jones 1988.

[17] Compare Carlyle and Carlyle (1950, 512): "And most remarkable is it that
Budé, who set out the doctrine of the absolute monarchy in France in the most
extravagant terms, should have at the same time felt compelled to draw
attention to the fact that the French Kings submitted to the judgment of the
Parliament of Paris; and that Bodin should have contended that the judges
should be permanent and irremovable, except by process of law, because the
kingdom should be governed by laws and not by the mere will of the
prince."

[18] Rosenberg states that the technological interpretation of the Marxist
philosophy of history relies upon a few "aphoristic assertions, often tossed
out in the heat of debate" (1982, 36). Nowhere in his essay, however, does he
allude to the locus classicus of the subject, Marx's Preface to A Contribution
to a Critique of Political Economy (Marx [1859] 1969b).

[19] Anderson (1991, 41) rejects technical change as an independent variable
explaining economic growth: "Technology is more appropriately seen as dependent
on the institutional structure and the availability of capital, including
'human capital' expressed as an educated, skilled, and healthy workforce. The
availability of capital is in turn dependent on a favorable set of
institutions."

[20] Rostow's dismissive tone in his treatment of Bauer may well have been
affected by Bauer's devastating review of Rostow's magnum opus, The Stages of
Economic Growth. See Bauer (1972: 477–89).

[21] See, for instance, Roberts (1985): Chirot (1986); and Kennedy (1987,
19–20), where the author of this celebrated book writes of the "decentralized,
largely unsupervised growth of commerce and merchants and ports and markets [in
Europe]… there was no way in which such economic developments could be fully
suppressed … there existed no uniform authority in Europe which could
effectively halt this or that commercial development; no central government
whose change in priorities could cause the rise or fall of a particular
industry; no systematic and universal plundering of businessmen and
entrepreneurs by tax gatherers, which so retarded the economy of Moghul India."